Money matters: All you need to know about pensions and divorce

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Originally, the value of any pension rights was simply included as a marital asset and offset against the value of other assets to agree a settlement.

There are now two more options: The Pensions Act 1995 introduced pension earmarking; and The Welfare Reform and Pensions Act 1999 introduced pension sharing.

A combination of methods can be used, but the same pension rights can’t be both shared and earmarked.

It’s up to the parties and their lawyers and, if necessary, the court to decide on the best method for taking pension rights into account in the divorce or dissolution settlement.

None of the options are mandatory. Each case is assessed individually.

Most pension rights can normally be taken into account as marital assets in a divorce or dissolution of a civil partnership, including entitlements to the earnings related element of the State Pension (SERPS or S2P).

There are, however, some pension rights that are excluded – for example, basic State Pension, State Graduated Pension or any survivor’s pension being paid following the death of a former spouse or civil partner.

The treatment of pension rights can be one of the most complex aspects of a divorce or dissolution settlement.

There are various factors that need to be taken into consideration and each party will need professional advice on what option is best for them in their personal circumstances.

For example: the parties need to be aware of what the scheme’s policy is on pensions and divorce and what this means for them;

l both parties may need independent advice on making up any shortfall between the benefits they expected and what they will now receive

l the former spouse or civil partner of the member may need pension transfer advice.

If you are affected, then please seek advice.